SEC’s ETF decision means ETH and ’a lot’ of other tokens are not securities

    24 May 2024

    The approval of spot Ether (ETH) exchange-traded funds is “implicit recognition” from the United States Securities and Exchange Commission that Ether is not a security, according to industry pundits.

    One even suggests this could extend to other tokens as well.

    “These are commodities-based trust shares, so the SEC, by approving these, is explicitly saying they’re not going to go after Ether as a security,” noted Bloomberg ETF analyst James Seyffart in a discussion with Ryan Sean Adams on the Bankless podcast.

    Digital asset lawyer Justin Browder believes if Ether ETFs get S-1 approval—the final piece needed for them to begin trading—then the “debate is over: ETH is not a security.”

    Adam Cochran, partner at venture capital firm Cinneamhain Ventures, went one step further, arguing the line of thinking could extend to other projects’ tokens.

    “ETH is a commodity, even with its current attributes. That means we can extrapolate to *A LOT* of other projects what elements matter in security. Today a lot of things probably clearly became commodities, even if they don’t know it yet.”

    However, Seyffart and others believe the SEC could continue to pursue actors involved with staking Ether:

    “[I think they will] try thread this needle and say ETH itself, they’re not going to call a security but staked ETH might be a security […] and I don’t believe they’re going to give that up any time soon.”

    Digital asset lawyer Joe Carlasare agrees with Seyffart’s view.

    “The SEC could pursue individual actors and staking as a service even with the ETF launched. I think other actions are less likely,” Carlasare told Cointelegraph.

    In April, Ethereum infrastructure firm Consensys received a Wells notice from the SEC, which was primarily focused on Metamask’s trading and staking services.

    Finance lawyer Scott Johnsson also noted the SEC didn’t confirm Ether’s non-security status in its approval order, saying it “completely sidestepped” the issue.

    However, the SEC and some of its Commissioners are expected to make an official statement in due course.

    The SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise to issue spot Ether ETFs on May 23. Many ETFs issuers notably removed staking in their final amendments.

    Hashdex was the only ETF issuer that didn’t receive regulatory approval on the day.

    However, the eight approved ETF issuers will need to wait until the SEC signs off on their S-1 registration statements before launching.


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